Barclays Pushed to Loss by Africa Write-Down -- 2nd Update

Barclays PLC on Friday said it swung to a second-quarter net loss as it took a hit on the disposal of its Africa operations and higher provisions for conduct costs.

Overall the bank's results were mixed. Revenue fell on the back of muted trading at its investment bank and lower sales at its retail operations. But the investment bank performed better than some analysts had expected.

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Impairments increased at its credit-card division and the bank took a GBP700 million charge to compensate customers who were sold insurance products they didn't need. It also took a GBP2.5 billion hit on the disposal of its African business, pushing the lender to an overall net loss of GBP1.4 billion for the quarter, compared with a GBP677 million profit in the same period last year.

The earnings come as Barclays is largely finished with the first stage of Chief Executive Jes Staley's strategy revamp. The quarter "essentially closed the restructuring of Barclays," he said.

The bank has completed a retreat from Africa, retrenched its investment bank and closed its noncore division, which held billions of unwanted assets.

However, shares have fallen in the last three months as investors fret whether the new-look Barclays can produce returns. Dividend rises are still over the horizon, although the bank said it would update investors at its full-year results in February. It said Friday it is now targeting a greater than 10% group return on tangible equity "over time." The group's second-quarter tangible equity was minus 11%.

The British bank said total income came in at GBP5 billion for the quarter, compared with GBP5.97 billion a year ago. Excluding one-offs, profit before tax was GBP659 million, which was below analysts expectations. Shares inched up 0.6% in morning trading.

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Over the past year, the focus has been shoring up Barclays's balance sheet. Cutting its stake in its Africa division has helped push the bank's capital ratio up to 13.1%. Now the bank is focusing on becoming more efficient, Mr. Staley said. The lender hopes GBP1 billion of costs will fall away in the next two years.

Barclays's closely watched investment bank reported another fall in revenue, with its macro-trading division suffering another poor quarter as sales fell heavily. However, sales at its bond-trading and equities-trading divisions rose.

Analysts at Jefferies said returns at the investment bank were "reasonable given peers' performance." Barclays is reallocating capital within that division from its corporate loan book to its markets business, in particular its prime-brokerage division.

A series of regulatory issues still hang over the bank. Barclays is being sued by the Justice Department over its role in the packaging and sale of toxic mortgage-backed securities. Mr. Staley is himself being probed by U.K. regulators after trying to unmask a whistleblower.